Exam 20: Corporations and Bonds Payable

The real or actual rate of interest to the borrowing corporation is called the:

The straight-line method for amortization of bonds allocates equal amounts of premium to Bonds Interest Expense each period.

On October 1, Indiana Company issued $40,000, 10%, 5-year bonds at 102. What is the adjusting entry on December 31 using the straight-line method?

Mansfield Corporation sells $900,000, 13%, 10-year bonds for 98 on January 1. Interest is paid on January 1 and July 1. Straight-line amortization is used. The entry to record the issuance of the bonds on January 1 is:

The market rate of interest and the contract rate of interest are always the same for a bond sold at a discount.

The corporation will repay the principal amount of the bond on the maturity date.

Discount on Bonds Payable is a:

What is the difference between a secured bond and a debenture bond?

On March 1, 20XX, Janes Company issued $200,000, 10-year, 6% bonds at face value. The bonds have semiannual interest payments on June 30 and December 31. Record the 20XX journal entries.

Bonds that may be redeemed at a certain price level are known as:

If a bond is issued at a discount, the effective interest rate is most likely ________ the contract interest rate.

A bond is issued for less than its face value. Which of the following statements most likely would explain why?

On January 1, Buy-New Online issued $500,000, 10%, 10-year bonds to lenders at the contract rate. Interest is to be paid semiannually on July 1 and January 1. Journalize the following entries: a. Issued the bonds. b. Paid first semiannual interest payment. c. Retired the bonds at maturity.

All bonds have accrued interest adjustments on December 31.

What is the purpose of a bond sinking fund?

When the contract rate of interest on bonds is equal to the market rate of interest, bonds sell at:

Marlo Corporation issued $400,000 of 14%, 10-year bonds for $380,000. The entry to record the issuance of the bonds includes a:

A bond's discount is amortized over the term of the bond.

Harley Corporation issued a 10%, $800,000 8-year bond at 104. The entry to record the issuance transaction is to:

Using the following accounts: Indicate the account(s) to be debited and credited to record the following transactions. -Accrued interest on bonds which sold beneath face value. Debit ________ Credit ________ & ________ A)Cash B)Bond Sinking fund C)Equipment D)Building E)Land F)Accounts payable G)Notes payable H)Bond payable I)Bond interest payable J)Premium on bonds payable K)Discount on bonds payable L)Common stock M)Retained earnings N)Sinking fund earned O)Bond interest expense P)Gain on retirement Q)Loss on retirement